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Dynamic noisy rational expectations equilibrium with insider information: Welfare and regulation

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  • Detemple, Jerome
  • Rindisbacher, Marcel
  • Robertson, Scott

Abstract

This paper examines welfare properties of equilibra in the general dynamic model with asymmetric information of Detemple et al. (2020). Explicit formulas for ex-ante and interim welfare are obtained, and equilibria are compared. We show a tax structured as an exchange option based on public information induces the insider to optimally forgo using her private information at all times.

Suggested Citation

  • Detemple, Jerome & Rindisbacher, Marcel & Robertson, Scott, 2022. "Dynamic noisy rational expectations equilibrium with insider information: Welfare and regulation," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:dyncon:v:141:y:2022:i:c:s0165188922000793
    DOI: 10.1016/j.jedc.2022.104375
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    References listed on IDEAS

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